We all know what we should do with our money — save, invest and avoid debt. But even the best of us fall into bad habits. According to Morgan Housel, author of “The Psychology of Money,” one habit stands out as the most dangerous of all.
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Here’s the all-too-common habit Housel believes can threaten your financial stability.
The Money Habit That Can Wreck Your Finances
During an appearance on “The School of Greatness” podcast, Housel identified FOMO — fear of missing out — as the top driver of poor financial decisions.
“I think the most dangerous trait in money, whether it’s saving or investing, is FOMO,” he said.
Many of us are susceptible to feeling envy when we see a neighbor, friend or co-worker get rich, Housel said. Even if these feelings of envy are subconscious, they may lead us to want what they have, whether it’s a bigger house or fancier car.
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Why FOMO Is Financially Destructive
FOMO often stems from the envy we get from seeing others with luxury items and assuming they’re wealthier than we are. But Housel warned that appearances can be deceiving.
“People put their best foot forward, so what they are showing you is not indicative of what it is,” he said.
He noted that many people who drive fancy cars can’t actually afford them — but we believe they can, and that drives us to believe we should have these unaffordable things, too.
“In college, I was a valet in Los Angeles, and it always stunned me that when people would come into the hotel at work driving a Ferrari, a Lamborghini, a Bentley, when you get to know some of these people, some of them were actually not that successful,” Housel said. “They were a law firm associate who spent half their paycheck on a Porsche lease.”
Don’t Chase Appearances — Chase Stability
Housel cautioned against trying to match others’ spending, especially when it’s based on debt or illusion.
“The ‘fake it ’til you make it’ idea is so powerful in America,” Housel said. “If you see, ‘Oh, that guy’s driving a nice truck, I need to go get one, too, because I’m just as smart, I work just as hard as that guy.’ That’s really dangerous, because you’re not chasing their success, you’re chasing their fakeness.”
The better course of action is to stay in your lane and buy things that make sense for your budget. Being too easily affected by FOMO can cause you to miss out on saving and investing opportunities that will make you richer in the long term.
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This article originally appeared on GOBankingRates.com: The Most Dangerous Money Habit You Can Have, According to Morgan Housel
